# For the coming year, Loudermilk Inc. anticipates fixed costs of \$600,000, a unit variable cost of \$75, and a unit selling price of \$125. The maximum sales within the relevant range are \$2,500,000.a.  Construct a cost-volume-profit chart on a sheet of paper. Indicate whether each of the following levels of sales (units or dollars) is in the operating profit area, operating loss area, or at the break-even point.4,800 unitsOperating Loss Area 12,000 unitsOperating Profit Area \$1,500,000Operating Profit Area 20,000 unitsOperating Profit Area \$2,500,000Operating Profit Area b.  Estimate the break-even sales (dollars) by using the cost-volume-profit chart constructed in part (a).\$1,500,000 c.  The graphic format permits the user to visually determine the ?  and the ?  for any given level of ? .

Question
Asked Mar 7, 2020
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For the coming year, Loudermilk Inc. anticipates fixed costs of \$600,000, a unit variable cost of \$75, and a unit selling price of \$125. The maximum sales within the relevant range are \$2,500,000.

a.  Construct a cost-volume-profit chart on a sheet of paper. Indicate whether each of the following levels of sales (units or dollars) is in the operating profit area, operating loss area, or at the break-even point.

 4,800 units Operating Loss Area 12,000 units Operating Profit Area \$1,500,000 Operating Profit Area 20,000 units Operating Profit Area \$2,500,000 Operating Profit Area

b.  Estimate the break-even sales (dollars) by using the cost-volume-profit chart constructed in part (a).
\$1,500,000

c.  The graphic format permits the user to visually determine the ?  and the ?  for any given level of ? .

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## Expert Answer

Step 1

a)  Prepare Break-even chart:

 4800 units Operating Loss area 12000 units Break-even point \$1,500,000 Break-even point 20000 units Operating Profit area \$2,500,000 Operating Profit area

Step 2

Calculate the break-even sales in dollars:

 Selling price per unit \$125 Variable cost per unit \$75 Contribution per unit (A) \$50 Fixed costs (B) \$600,000 Break even units (C) = (B) / (A) 12000 Units Break even sales (D) = (C) x \$125 \$1,500,000
...

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